With entrepreneurship becoming something of a buzzword in the Middle East, it would be easy to assume that it is booming. But while support for new companies is certainly growing, for some it is not nearly fast enough.
Usama Fayyad, Executive Chairman of Oasis 500 – Jordan’s largest fund for supporting early stage start-ups – believes the Arab world is still lagging behind when it comes to supporting innovation.
The company has invested $2.3 million in 58 startups since September 2010, and claim that the first half million of investment they made attracted $8 million from outside investors. But Fayyad believes the time has come for governments to take more action to stimulate entrepreneurship.
We keep hearing about how fast entrepreneurship is developing in the Arab world, but do you believe the hype?
The talk is much, much more than the action. People tend to talk a lot, talking as if they have launched something a year before they do, and when they launch it they tend to not execute.
We have heard about lots of early stage funds that have come up in Dubai and Beirut, and what happens is they show up in the news and we are sitting waiting for them to invest [but it doesn’t happen].
What is happening is a lot of people have an idealized model in their head – they think you create a fund, hear some pitches and make some investments. But [entrepreneur development] is really hard work. You have to work with them; you have to find ways to localize it so it works. It is not [just] ‘put it up’ and customers will show up.
With Oasis 500, we really didn’t talk about it until we did our first five investments. Then we said ‘OK, now we have got it, we understand what we are doing, we have a plan for the next 10, now we will talk.’
ArabNet founder Omar Christidis recently said that people had created too much hype around entrepreneurship as it has become ‘en vogue’. Is that a danger?
I don’t know if it is a danger, I think it is a fact. I am happy they are bragging about wanting to be an entrepreneur, rather than bragging about wanting to buy the latest clothes or wanting a job in the government. So it is a good trend.
But I think what will really change behaviors is when we start seeing true success factors: people who have the will and the determination will start looking at it and seeing it as a serious career. Then I think the hype helps because what happens is when they take that perceived dangerous step of quitting their day job to try and build a company, they will not feel like they are doing something very unusual or out of favor.
How far are we from those success stories?
I think there have been a few, not enough but [attitudes are changing]. For example, when we started Oasis 500 the biggest complaint I used to hear from participants in our bootcamps were their families thinking they were crazy for taking a week off to get trained, saying ‘what are you doing risking your job?’
Now, two years later, I have seen a real change where people are saying ‘my mother or father has pushed me to take this because our neighbor did this, raised $200,000 and are in the news shaking hands with the king.’ That changes the norms of what is success.
It is beginning to happen, but my biggest worries remain. In a region like ours with over 300 million people and a lot of oil, it is pathetic [to have so little support for startups].
Oasis 500, for all the noise we make, is just $6 million dollars so far. We are going to raise it to 10 and then to 30, but so what? That is nothing. People spend $200 million on a building all the time. Yet you still don’t see these funds and they are needed.
It is sad right now and I am not seeing where the solution is going to come from. In other countries it came from the government – in the US and Israel they pumped lots of money into venture capital funds.
But would you really want governments in the Arab world, many of which are deeply inefficient, doing this?
Governments should reallocate resources but should not manage these things. Governments are terrible managers of entrepreneurial things, but they are enablers. A government should pave the road and make sure the traffic rules apply, but they shouldn’t be running the restaurants on the road as they would give terrible service. We need to pave the way with funding, we need to make sure funding is available…they already do this for buildings, for leases, for economic programs – they just don’t think of doing it for companies.
And have you seen a change in mindset from Arab governments yet?
No. None. I think the hype around entrepreneurship is making it noticeable, so they are maybe starting to ask about it.